Tesla shares accelerate after profit surprises

Tesla Motors, the electric-car company led by Elon Musk, rose 14 per cent after reporting second-quarter results that surpassed analysts’ estimates on a surge in Model S sedan deliveries.

The company reported a second-quarter operating profit of 20 cents a share, including 15 cents related to a leasing program. Even without that provision, results exceeded the average of 10 analysts’ estimates for a 20-cent loss, according data compiled by Bloomberg. On its operating basis, Tesla said it will make money all year. The net loss was $US30.5 million.

Shares of the Palo Alto, California-based company jumped to $US153.20 in extended trading at 7:59 p.m. New York time Thursday, bringing its market value to more than $US18 billion. Model S deliveries totaled 5,150 in the second quarter, topping the company’s target of 4,500, and Musk said an annual selling rate of 40,000 by the end of next year looks “pretty safe.”

“What’s more impressive than even the profit numbers are the increasing rate of production and growing margin that they’re making per vehicle,” Karl Brauer, an analyst with Kelley Blue Book in Irvine, California, said in an interview.

Tesla began its leasing program in April, reducing net income by $US19.3 million. The operating profit also excludes $US16 million in costs for early repayment of a U.S. Energy Department loan, according to a statement. The company had $US19.3 million of stock-based compensation expense that it excludes from the operating figure.

Revenue surged to $US405.1 million, exceeding the $US387.9 million average of 10 analyst estimates compiled by Bloomberg, from $US26.7 million a year earlier when Tesla posted a net loss of $US105.6 million.

Winning customers

The Model S, priced from $US69,900 before a $US7,500 tax credit, received the highest rating ever from Consumer Reports, which praised its sporty handling and luxury interior. Musk said the sedan is winning customers who had owned Toyota Motor Corp.’s Prius and Daimler AG’s Mercedes-Benz E-Class. Toyota and Daimler are investors in Tesla and buyers of its battery packs.

Tesla’s Model X sport-utility vehicle remains on track to begin sales late next year, he said, adding that its development is “swiftly rising” among the company’s priorities. The SUV will be priced about the same as the Model S, he said last month in a post on Twitter that has since been deleted.

Beyond that, Musk said he has “high confidence” that Tesla will be able to produce a more affordable car with a 200-mile range for about $US35,000.

Profit forecast

The company said its operating margins were 22 per cent, up from 17 per cent in the first quarter. Tesla said it expects to post operating profits and generate cash every quarter in 2013, excluding sales of green-car credits to other automakers. Revenue from the sale of those credits slid to $US51 million from $US68 million in the first quarter.

Tesla began delivering the first Model S sedans to customers in Europe this week and is preparing to export to Asia late in 2013. Musk, who is also the company’s biggest investor, has said that over time two-thirds of Tesla’s sales will come from overseas markets.

Musk said he anticipates China and Japan becoming important markets for the Model S. The company plans to open a store in Beijing by the end of 2013, and Musk said Tesla is working on a more comfortable rear seat for China, where many car-buyers have chauffeurs. Tesla aims to make the same margin on each car in every country, Musk said.

“We don’t want to rip anyone off,” Musk said on the call. “In China, it’s quite common for manufacturers to mark up the cars in a pretty huge way. We will not be doing that.”

Tesla projected Model S sales rising to an annualised rate of 40,000 sedans by the end of next year if demand in Asia is as strong as in North America and Europe. Musk said that was a “pretty safe” target.

The company expects to deliver “slightly” more than 5,000 Model S cars this quarter and 21,000 worldwide this year.

“They’re selling a lot more vehicles than I think a lot of people expected,” Kelley Blue Book’s Brauer said.